Netscape settled a 5-year-old lawsuit brought by Playboy Enterprises, a week after a federal appeals court ruled that the Web company could be held liable for the unauthorized use of trademarks in search engine ads.

A representative for America Online, which owns Netscape, said the two parties reached an agreement within the last week and signed papers in court Thursday. Terms of the settlement were not disclosed.

Last week, the Ninth Circuit U.S. Court of Appeals in San Francisco found Playboy can pursue charges that Excite and Netscape violated its trademark by selling banner advertisements triggered by the terms "playboy" and "playmate." The decision reversed a district court ruling that dismissed the suit without a trial in 2000.

The settlement puts an end to a case that likely held barring on many recent suits related to search engine advertising, trademark attorneys said. Scant trademark law exists when it comes to search engine-related advertising, and last week's opinion was the first on the issue from an appellate court, according to attorneys following the case.

Complaints over misuse of trademarks in search engine ads are growing because of the influence of such programs from Google and Yahoo-owned Overture Services. Google, for example, faces trademark complaints from advertisers of its popular keyword-auction program. In December, Google asked a court to rule on whether its keyword-advertising policy is legal as a result.

The Playboy lawsuit centered on the search engines' practice of "keying," or selling and displaying ads related to search terms. Advertisers can buy the right to appear above or adjacent to search results related to specific query terms, such as "books" or "digital cameras." That means that when a visitor searches on the term "travel," for example, he or she might see an ad for an airline company. But advertisers also can use the system to prey on rivals' trademarked terms and poach their traffic.

In Playboy's case, it charged Excite with trademark infringement when it sold banner ads to adult-related sites keyed to the terms "playboy" and "playmate," arguing that it created consumer confusion and diluted its trademarked names. Playboy also claimed that Netscape violated its marks by displaying the same ads in partnership with Excite.

An earlier court decision dismissed the case on the grounds of fair use, among other arguments. The Ninth Circuit's analysis supported enough of a case for consumer confusion and brand dilution related to Playboy's trademarks that a trial was ordered.